FTSE 250-member Greggs (LSE:GRG) sells hot, tasty, filling and affordable treats from its 2,271 managed and franchised stores across the UK. Until the pandemic, it had never reported an annual loss since listing in 1984.
After it reported that loss for 2020, it was back to a profit again the following year. And so far, in 2022, things look good: half-year numbers show revenue and pre-tax profits are up 27.5% and 0.5% compared to last year. After being in a slump for most of the year, Greggs’ share price increased after those half-year numbers were reported.
Once focused on high-street takeaway shops, Greggs is now opening more in-store cafes and drive-throughs and popping up on garage forecourts. It has expanded its menus to include pizza-sharing boxes and doughnuts, and its vegan options have been well-received. Given its long history of success and willingness to innovate and expand, Greggs is a FTSE 250 stock I plan to hold in my Stocks and Shares ISA for decades.
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However, there are some things I need to keep an eye on. The company’s operating margins were squeezed from 10.8% in the first half of 2021 to 8.4% in the first half of this year, which, given what Greggs has had to deal with–rampant inflation of wheat and energy prices and a cost of living crisis–that might not look too bad.
However, it has managed to fix some of its input costs. That has maybe allowed it to be somewhat conservative in its price increases to customers. When these fixes expire, it will face the full force of inflation, whatever that will be.
Renewable energy stock
The Renewables Infrastructure Group (LSE:TRIG) unsurprisingly invests in wind farms, solar power, and battery storage (0.4%). The bulk of its operating assets is in the UK (60%), with the remainder in the rest of Europe. It is exposed to five different energy markets. Diversification is important since the company’s revenues–derived from selling electricity its assets generate–are exposed to regulatory and policy risks.
The UK government’s Energy Generator Levy, announced in November’s autumn statement, is one example of a realised risk that impacted Trig. According to the company, it knocked 8.3p off its per-share net asset value (NAV). But, the European Commission’s price cap is not expected to affect the value of the company’s assets.
Regarding the NAV, Trig’s latest estimate for it is 134.3p. That is higher than in June 2022 (134.2p) and December 2021 (119.3p). Given that the share price is around 132.9p, this investment trust is trading at a slight discount. That is the reverse of the situation in the summer months before the share price dropped in anticipation of windfall taxes and price caps.
FTSE 250 stocks for the long term
Decarbonising the energy mix has never been so urgent. This year’s surge in gas prices has laid bare the need for greater energy security and affordability. Trig invests in assets that satisfy these objectives and should find plenty of opportunities in the future.
However, it’s worth noting that risk will start to rise. The company’s fixed price contracts, hedges and subsidies are beginning to end. It will become more exposed to wholesale energy prices. I still expect the NAV and, thus, the share price to increase over time, but it will likely become more volatile. Nevertheless, Trig is a stock I don’t plan to sell for years to come.
